{"id":1619,"date":"2021-10-19T14:14:00","date_gmt":"2021-10-19T18:14:00","guid":{"rendered":"https:\/\/actec.matrixdev.net\/?post_type=capital-letter&p=1619"},"modified":"2024-01-18T16:51:57","modified_gmt":"2024-01-18T21:51:57","slug":"2021-2022-treasury-irs-priority-guidance-plan","status":"publish","type":"capital-letter","link":"https:\/\/actec.matrixdev.net\/capital-letter\/2021-2022-treasury-irs-priority-guidance-plan\/","title":{"rendered":"2021-2022 Treasury – IRS Priority Guidance Plan"},"content":{"rendered":"\n

Amidst the current whirlwind of uncertainty about pending legislation, let\u2019s pause to be reminded of the projects in the somewhat more predictable Treasury-IRS Priority Guidance Plan.<\/strong><\/em>
<\/p>\n\n\n\n

Dear Readers Who Follow Washington Developments: <\/em><\/p>\n\n\n\n

On September 9, 2021, the Treasury Department and the IRS released the first Priority Guidance Plan<\/a> in the Biden Administration for the plan year from July 1, 2021, through June 30, 2022. Similar to past Plans, the introduction to the 2021-2022 Plan states:<\/p>\n\n\n\n

\u201cThe 2021-2022 Priority Guidance Plan contains 193 guidance projects that are priorities for allocating Treasury Department and Service resources during the 12-month period from July 1, 2021 through June 30, 2022 (the plan year). The projects on the plan will be the focus of our efforts during the plan year. However, the plan does not provide any deadline for completing the projects.\u201d<\/p>\n\n\n\n

The 2021-2022 Plan includes the following items under the subject heading of \u201cGifts and Estates and Trusts,\u201d which will be described and analyzed in order in this Capital Letter:<\/p>\n\n\n\n

1. User fee for estate tax closing letters<\/p>\n\n\n\n

2. Consistent basis rules<\/p>\n\n\n\n

3. \u201cAnti-abuse\u201d amendment to \u201canti-clawback\u201d regulations<\/p>\n\n\n\n

4. Effect of events between death and the alternate valuation date<\/p>\n\n\n\n

5. Effect of guarantees and present value concepts on estate tax deductions<\/p>\n\n\n\n

6 and 7. Allocation of GST exemption<\/p>\n\n\n\n

8. Taxation of transfers from certain expatriates<\/p>\n\n\n\n

9. Actuarial tables<\/p>\n\n\n\n

ITEM 1: USER FEE FOR ESTATE TAX CLOSING LETTERS<\/h2>\n\n\n\n

Item 1 is described as \u201cFinal regulations establishing a user fee for estate tax closing letters. Proposed regulations were published on December 31, 2020.\u201d It was new in the 2020-2021 Plan, as Item 2 under Gifts and Estates and Trusts.<\/p>\n\n\n\n

Policy<\/h3>\n\n\n\n

Before June 1, 2015, the IRS routinely issued a closing letter (not the same as a formal \u201cclosing agreement\u201d) when the examination of an estate tax return was closed, except returns that were not required for estate tax purposes but were filed solely to elect portability. The \u201cFrequently Asked Questions on Estate Taxes\u201d on the IRS website was updated on June 16, 2015, to state that for such returns filed on or after June 1, 2015, closing letters would be issued only upon request. Notice 2017-12, 2017-5 I.R.B. 742, confirmed that, and also confirmed that an estate tax account transcript that includes the transaction code \u201c421\u201d and the explanation \u201cClosed examination of tax return\u201d can, as the Notice put it, \u201cserve as the functional equivalent of an estate tax closing letter.\u201d<\/p>\n\n\n\n

Many estate planning professionals have been frustrated with efforts to obtain such transcripts and in any event have not found that a transcript has the same dignity as a closing letter for purposes of obtaining the approval of courts and the release of liens and otherwise documenting the propriety of making distributions, closing accounts, and taking other financial actions.<\/p>\n\n\n\n

The IRS released proposed regulations at the end of 2020 and finalized them on September 27, 2021, establishing a $67 user fee for issuing an estate tax closing letter, effective October 28, 2021. Reg. \u00a7300.13, T.D. 9957, 86 Fed. Reg. 53539 (Sept. 28, 2021), 2021-41 I.R.B. 452.<\/p>\n\n\n\n

The preamble to the proposed regulations acknowledged the importance of closing letters to executors, but added:<\/p>\n\n\n\n

\u201cThe practice of issuing estate tax closing letters to authorized persons is not mandated by any provision of the Code or other statutory requirement. Instead, the practice is fundamentally a customer service convenience offered to authorized persons in view of the unique nature of estate tax return filings and the bearing of an estate\u2019s Federal estate tax obligations on the obligation to administer and close a probate estate under applicable State and local law.\u201d<\/p>\n\n\n\n

That is not persuasive at all. Surely the \u201cunique nature of estate tax return filings\u201d includes the IRS\u2019s benefit from liens, transferee liability, priority over other creditors, and other advantages, and with such power should come some level of responsibility. The preamble to the final regulations states that the IRS received comments opposing the establishment of a user fee, but it reaffirms the notion of the previous preamble that a user fee is appropriate because an estate tax closing letter is \u201cthe provision of a service that confers special benefits, beyond those accruing to the general public,\u201d without any acknowledgment of the fact that \u201cthe general public\u201d does not face those liens, liabilities, and other burdens.<\/p>\n\n\n\n

Probably, however, if there is anything more petty that the imposition of this $67 user fee, it would be an executor\u2019s choice to waste time fighting it.<\/p>\n\n\n\n

Details<\/h3>\n\n\n\n

The preamble to the proposed regulations explained that the practice of issuing closing letters for every filed estate tax return was changed in 2015 primarily for two reasons \u2013 (1) the increase in the volume of filed returns since the enactment of portability and (2) the availability of the transcript alternative described in Notice 2017-12. Regarding the first reason, the preamble noted that in 2016 approximately 20,000 optional estate tax returns were filed solely to elect portability, compared to approximately 12,000 mandatory returns. (A closing letter in the case of a portability-only return is arguably not as serious a matter, because no estate tax liability is at stake, and because the return may in effect be audited under section 2010(c)(5)(B) upon the surviving spouse\u2019s death anyway.)<\/p>\n\n\n\n

The preamble to the proposed regulations also included a detailed description of the calculation of the user fee, based on fiscal year 2017 and 2018 data, culminating in the determination of a full annual cost to the IRS (including direct labor and non-labor costs and a 74.08% overhead factor) of $1,160,058, divided by an estimated volume of 17,249 requests to produce the proposed user fee of $67. The calculations included an average of one-half hour of quality assurance review by a senior staff member applied to 5% of mailed closing letters.<\/p>\n\n\n\n

The regulations do not explain how to request a closing letter and pay the user fee, but the preamble to the proposed regulations stated:<\/p>\n\n\n\n

\u201cThe Treasury Department and the IRS expect to implement a procedure that will improve convenience and reduce burden for authorized persons requesting estate tax closing letters by initiating a one-step, web-based procedure to accomplish the request of the estate tax closing letter as well as the payment of the user fee. As presently contemplated, a Federal payment website, such as http:\/\/www.pay.gov, will be used and multiple requests will not be necessary. The Treasury Department and the IRS believe implementing such a one-step procedure will reduce the current administrative burden on authorized persons in requesting estate tax closing letters and will limit the burden associated with the establishment of a user fee for providing such service.\u201d<\/p>\n\n\n\n

On October 6, 2021, the IRS posted Frequently Asked Questions<\/a>, confirming the use of Pay.gov and addressing other procedural issues.<\/p>\n\n\n\n

ITEM 2: CONSISTENT BASIS RULES<\/h2>\n\n\n\n

Item 2 is described as \u201cFinal regulations under \u00a7\u00a71014(f) and 6035 regarding basis consistency between estate and person acquiring property from decedent. Proposed and temporary regulations were published on March 4, 2016.\u201d In the 2020-2021 Plan, this was Item 14 of Part 3, which was titled \u201cBurden Reduction.\u201d<\/p>\n\n\n\n

As noted in Capital Letters Number 44<\/a> and Number 50<\/a>, the appearance of this subject under the heading of \u201cBurden Reduction\u201d offered hope that the final regulations would relax one or two or all of the following very burdensome requirements of the proposed regulations published in March 2016:<\/p>\n\n\n\n